Brighter UK economy gives Reeves a springboard for March statement

"The economic backdrop to Rachel Reeves's upcoming spring statement appeared to brighten on Friday after a trio of reports painted a better-than-expected picture of the UK economy. Record monthly public finances, a surge in retail spending and accelerating business activity offered the most coherent picture of recovery since last autumn, economists said, and provided the chancellor with a more positive narrative ahead of her 3 March statement."

"Public sector finances posted their biggest monthly budget surplus since records began in 1993, of 30.4bn in January, according to the Office for National Statistics. The figure comfortably beat the forecast of 24bn made by the Office for Budget Responsibility, the government's official forecaster, and was driven by a large increase in self-assessment and capital gains tax receipts. It was double the surplus recorded in January 2025."

"Retail sales in Britain surged by 1.8% in January, the largest monthly increase in almost two years and partly driven by sales of artwork and antiques sales in January, alongside continued strong sales from online jewellers. Rounds of heavy discounting and post-Christmas sales drew customers back to bigger-ticket purchases, with furniture and tech among the biggest-selling categories over the past three months."

The UK posted a record monthly public sector budget surplus of £30.4bn in January, beating the OBR forecast of £24bn and doubling the January 2025 surplus, driven by large increases in self-assessment and capital gains tax receipts. Retail sales rose 1.8% in January, the largest monthly gain in nearly two years, aided by artwork and antiques sales and strong online jeweller demand, alongside heavy discounting and post-Christmas purchases in furniture and technology. A private-sector survey showed the fastest rise in activity since April 2024. Seasonal tax timing and jewellers' demand amid soaring gold prices provide caveats while the data strengthens the outlook ahead of the 3 March statement.

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